Home equity loans can be used to make home repairs.
Home equity loans allow homeowners to borrow based on the value of their home. The Home Equity Loan Consumer Protection Act monitors lenders such as banks and financial institutions and requires them to disclose the terms of loans.
Home Equity
A home equity loan is granted when a lender, such as a bank or financial institution, determines the equity of your home. Equity is determined by how much money you have put into owning or improving your home, according to Mortgageloan.com.
Benefits and Drawbacks
A home equity loan can be used for expenses such as home repairs, college tuition, medical bills and debt consolidation, according to Mortgageloan.com. But because it is a loan against your home, if you default on it, the bank or lender could collect by selling your home.
The Consumer Protection Act
The Home Equity Loan Consumer Protection Act is based on legislation found throughout U.S. Code, especially 1637 and 1647, according to the Federal Trade Commission's (FTC) website. The act is an amendment to the Truth in Lending Act.
Act Implications
According to the FTC, the act "requires creditors to provide certain disclosures for open-end credit plans secured by the consumer's dwelling and imposes substantive limitations on such plans." Or, in layman's terms, the act requires openness in home equity lines of credit and some limitations on them as well.
Act Specifics
Specifically, lenders must tell borrowers the terms, rates and conditions of the loan before any transaction can be completed. These terms, rates and conditions include Annual Percentage Rates, charges and payment terms, according to the Federal Deposit Insurance Corporation's website. Creditors are limited as to how and when they can change the terms of the loans after they are enacted.
Tags: Consumer Protection, your home, according Federal, according Mortgageloan, Equity Loan, Equity Loan Consumer
